US stocks rose on Monday to start a key week in which Wall Street awaits earnings from some of the biggest market players.
The S&P 500 (^GSPC) climbed about 1.2% while the Dow Jones Industrial Average (^DJI) rose more than 400 points, or about 1.3%. The tech-heavy Nasdaq Composite (^IXIC) rose 0.9% after starting the day in the red.
Yields on US Treasuries rose slightly on Monday after a relentless rise over the past week that saw the 10-year note temporarily hit a 14-year high above 4.3%.
On Friday, the Wall Street Journal reported that some Federal Reserve officials were concerned about the pace of interest rate hikes ahead of their November meeting, prompting stocks to rally to end a winning week.
San Francisco Federal Reserve Chair Mary Daly also said the central bank should avoid plunging the economy into an “unforced slowdown” and that it’s time to consider slowing the pace of currency hikes. interest rate.
“I think that’s the wrong message,” Thomas Peterffy, chairman and founder of Interactive Brokers, told Yahoo Finance Live Friday after Daly’s remarks. “I think the Fed needs to send the message that we’re going to stamp out inflation no matter what. And they’re in a better position if they can scare the market into loosening spending rather than having to. force to do it.
Monday’s data also showed that the central bank’s tightening policies were starting to weigh on U.S. corporate activity, with the Purchasing Managers’ Index pointing to weakness in the services and manufacturing sectors of the United States. economy.
Wall Street’s optimistic reversal comes as investors await earnings from the five biggest technology companies – Microsoft (MSFT), Alphabet (GOOGL), Meta Platforms (FB), Apple (AAPL) and Amazon (AMZN) – which represent at alone about a quarter of the market capitalization of the S&P 500 index.
“Historically, when these four companies report in the same trading week, Alphabet (GOOG) has been the only one to consistently see its stock react positively to earnings, while the others have all trended lower. Among these events prior, the last quarter was the first time these four stocks traded higher in response to earnings,” wrote Jake Gordon, an analyst at Bespoke Investments Group.
Third-quarter earnings have been better than expected so far, with beats from companies like Netflix (NFLX), AT&T (T) and IBM (IBM) offsetting failures from companies like Snap (SNAP), which have fell 28% on Friday after being disappointing. results.
FactSet data shows that S&P 500 companies that failed to meet expectations this earnings season fell 4.7% on average in the two days leading up to their report through the following two days, compared to a five-year average of 2.2%.
Still, overall investor expectations are relatively below normal.
“Earnings expectations, if you exclude the energy sector, have fallen from about 6% positive in July for earnings this quarter, to … 3% negative,” Yung-Yu Ma told Yahoo. , Chief Investment Strategist of BMO Wealth Management. Finances Live Friday. “And so once you lower the bar that much, it creates an environment where it’s much easier to beat profits, much easier to have relief rallies.”
The strength of the US dollar weighed heavily on corporate earnings. The dollar appreciated on Monday against the weaker Chinese yuan. In European markets, the pound traded stronger as UK government bonds rallied after Boris Johnson pulled out of the prime ministerial race, leaving former chancellor Rishi Sunak closer to becoming the next prime minister.
Chinese stocks also had their worst day since 2008, and U.S.-listed Chinese stocks Alibaba (BABA) and JD.com Inc. (JD) fell on Monday as President Xi Jinping began an unprecedented third term in office. controlling the ruling communist party.
The news hit other stocks exposed to China. Shares of Tesla (TSLA) fell 4% after the automaker lowered prices for its vehicles sold in China as the company faces fierce competition from local rivals in its second largest market.
Elsewhere, the crypto traded in a mixed pattern as Bitcoin headed towards the $19,000 level, while Ethereum pulled back as its supply appeared to shrink since the meltdown.
“Bitcoin remains stuck around the $19,000 level and this will likely remain the case until we pass next week’s FOMC policy meeting,” wrote Edward Moya, principal analyst at OANDA.
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Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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